TRANSCRIPTION

Starting a business isn’t easy. In my past conversations with new entrepreneurs, many of them often ask me, “Willy, should I start an eCommerce business or a brick-and-mortar business? Which type of business is more sustainable in the long run?” So in today’s podcast, I shall give my two cents’ worth of opinions about this matter.


Actually, I’d rather say that both eCommerce and brick-and-mortar are means of how you conduct your business, instead of saying that they are ‘business types’. Both methods have their merits and shortcomings. There’s really no one way to decide which method is more ‘sustainable’, or ‘profitable’– what matters is the nature of the business you decide to work with, and your ability to adapt to changes.


Traditionally, we can classify businesses into two broad categories: product-based businesses and service-based business. A product-based business means you are selling physical, tangible products, say, hair-dryers, fans, cups and mugs, etc. Meanwhile, a service-based business refers to how a business owner sells his skills as the primary product. For example, you hire a plumber, a lawyer or a tutor for their services to you and your family.


Most people will assume that it’s best to operate a product-based business offline, while service-based businesses are more suitable for online operations. For example, you can hire a virtual assistant to help you do admin work online, or engage a tutor for online tutoring, but you have to buy your computer in person to check for its quality. But this is not true. Times are changing, and businesses inevitably have to develop an eCommerce arm if they want to stay relevant and continue thriving.


For instance, I recently discovered that some PC businesses in Singapore like Aftershock, Dreamcore and Mansa are starting to sell their PCs online. In the past, such companies had to operate their businesses offline, because many people prefer to go down to their physical stores to see and touch the PCs in person before deciding to buy. But now, the situation is different. Especially since the outbreak of the coronavirus when we are encouraged to stay at home, the convenience of buying things online is getting magnified. Just look around you: last time, we’d think getting food to be delivered to our houses through online apps as something extravagant. Now, such food delivery apps are considered a norm and a must-have for many people!


So now, if you ask me to compare the sustainability of businesses that operates through eCommerce or brick-and-mortar methods, my answer is that eCommerce businesses win the upper hand. And considering today’s business climate, I will encourage all business owners to start thinking about how to build an online presence. But of course, you also need to see if your business or the business you are intending to set up is suitable for eCommerce. Here are several factors you may want to take note of.


First of all, to start doing business online, you need to build a website. And on that website, you need to introduce yourself and your business, provide means of how people can reach you, and show evidence that you are running a legit business. This will allow consumers to find you online and to look you up when in doubt – or else, they won’t feel safe buying things from you!


Next, you need to provide suitable payment methods and set up the required payment processes. For example, can your customers make payments via Paypal or Stripe? You need to take note that you will be charged processing fees for choosing these payment methods. Normally, such fees should be around 3-5% of your products’ selling prices. But if you are intending to sell products internationally, you will also have to consider the Forex exchange rates, and there will be higher processing fees involved. Hence, it is necessary to adjust your products’ selling prices accordingly so that you can achieve your desired profit margins.


Last but not least, you then have to look at how to fulfil your orders. Do you have the means of delivering your products to your customers? How can customers reach you for after-sales services, like exchanges or returns of faulty units? All these are what I call the ‘maintenance’ of an eCommerce business. Providing solid ‘maintenance’ service is essential if you want to go into eCommerce. After all, since your customers are not going to meet you in person, or see your products before they get delivered to them, you have to earn their trust and assure them that they can transact with you with peace of mind. You need to let them know that they can always find you if anything is wrong.

Compared to a brick-and-mortar business where your customers can go down to a physical store and do the traditional cash-and-carry, all of the above are issues you need to sort out before you start your eCommerce business. Are you comfortable with doing that? Is your business’s nature – like the things you sell, and the sales processes involved – suitable for doing so? You need to do the evaluation yourself.


Saying that, I still believe eCommerce is the way to go, simply because of the advantages below:


Number 1: Operating businesses via the eCommerce method will allow business owners to focus on the core business functions better. This is especially so for new entrepreneurs – they can have a slim and lean start-up. One can simply outsource the fulfilment and delivery processes to other professional third-party companies, while they focus on setting up the business itself and do more complex things like marketing, deciding the business’s directions and its target audience. This is what a lot of blog shops used to do before they start to have their physical stores, and it’s a fast way to get the business running.


Number 2: Running an eCommerce business will help to save costs. This is because since you don’t need to have a place or ‘showroom’ to display your products, you can save up on the rental fees, renovation fees, utility fees, etc, that may be involved if you have a physical store. For example, some furniture businesses have started setting up virtual showrooms to display their furniture, and they are definitely earning more profits than previously. Other than that, you can cut down on manpower costs – there’s no need to hire a lot of employees for your business now, because you can set up AI to help you handle some business processes, such as handling customers’ enquiries. Only a few employees are required to oversee the whole process, and step in to intervene if the AI cannot handle your customers’ queries. This will make your business’s operations much smoother. At the same time, you can save precious time and money!


Number 3: An eCommerce business guarantees you better adaptability to changes in the world. Now, I can’t emphasize more about this point, but being adaptable is important for all businesses. Just look at what’s happening in the world right now – many brick-and-mortar businesses are facing the crisis of being closed down due to the coronavirus. They are caught off-guard when the pandemic strike, and because they could not continue their businesses online, or started advancing online too late, they suffered great losses and eventually had to wind up. Some famous examples include Robinsons, Sportslink and Bakerzin. My point here is that eCommerce helps businesses become more flexible – you can always continue selling online should your business be unfortunately classified as an ‘unessential service’ one day.


Much as it may sound uncomfortable for some of us, we cannot deny this fact: the world is going online. Even for banks – recent news had announced that fully digital banks are going to be introduced to the Singapore market. That means, these new banks will not have a physical presence and all banking services will be done online. That seems absurd 20 years back, but hey, you need to admit: digitalization is the future. So, to remain relevant, do make the transit online now – you will thank yourself for this move!


Goodbye, and I will see you in the next episode.